I am very happy with jog performance in linuxcnc. On the k&t I use it all the time for setting parts/tools. (I use a 1/2 dowel pin and jog wheel for setting zero - rolling it between the part and tool)

http://linuxcnc.org/docs/html/examples/mpg.html

There are a bunch of ways to hook a physical jog encoder up. The above example is similar to how I have implemented it on my machines. That example is also a real time jog implementation.
Thanks for all your input regarding Linuxcnc, I have decided to take the plunge and have ordered the mesa 5i25 and 7i76 kit, which should arrive to me next week sometime. I was really impressed with your machine setup, some complex stuff going on there for the toolchanger to work so well ;) Thanks also for the info on the MPG setup, the code doesn't mean a whole lot to me at the minute, but I'm sure I'll get my head around it!

I'm going to ditch out the windows install on my bridgeport pc and load up linux asap. I've been afraid of trying linuxcnc for a while and I'm sure I'm not the only 1 who'd consider it to be a move over to the darkside, but hey! it might turn out to be the best thing I've done

Its all still very daunting and I'm sure there is a learning curve, but from what I'm reading this seems the right decision for my machine at this time. I know there is always a linux vs mach3 battle going on as with the Windows vs Apple. I use a Mac 90% of the time btw